Input costs hit India Cements net

A combination of factors, predominantly the acute power shortage in the southern States coupled with a softening in cement prices, dented the bottom line of The India Cements Ltd. in 2012-13, with the company’s net profit declining by 44 per cent to Rs. 163.55 crore.

The cement major had reported a net profit of Rs. 292.97 crore for the previous fiscal. Net sales, however, increased to Rs. 4,597 crore from Rs. 4,203 crore a year earlier.

“The story of the year, unfortunately, is increased costs. A steep increase in freight rate by railways and a 20 per cent increase in power costs have impacted the cost of production. ,” said N Srinivasan, Vice-Chairman and Managing Director, while addressing reporters here on Monday.

For the fourth quarter ended March 31, 2013, the company reported a 60 per cent dip in net profit at Rs. 26.28 crore mainly due to higher expenses for fuel, freight and power. The company had reported Rs. 64.92 crore in net profit during the corresponding quarter last fiscal.

Dividend

According to a BSE filing, the company board had recommended a dividend of Rs. 2 per share for the 2012-13 fiscal.

Mr. Srinivasan said though power shortage was severe in Andhra Pradesh the company was unable to use power it generated in Tamil Nadu. “We are not allowed to sell,” he said, adding the company had to purchase power from outside, which was expensive. The cost per unit went up from Rs. 3 to Rs. 4.

Senior executives added as per the pollution clearance for its Sankar Nagar thermal power plant in Tamil Nadu the generation is only for captive consumption. As a result, the plant was operated below capacity. The company was exploring the possibility of selling power from its 26 MW gas-based unit in Ramanathapuram since that was not bound by a similar condition. India Cements also expected a portion of its upcoming 50 MW thermal power plant in Vishnupuram, Andhra Pradesh, to go on stream shortly.The cost of production was also impacted by the separate, higher pricing for bulk consumers of diesel. Noting that the effect of capacity overhang in the south continued , Mr. Srinivasan said in the last six months cement prices in Andhra Pradesh came down from Rs.265-270 per bag to Rs.190-195. “The drop in price affected… also resulted in softening of prices in Tamil Nadu and Karnataka,” he added. The company, which, improved the capacity utilisation from 67 per cent in 2011-12 to 71 per cent in the last fiscal was pursuing a strategy of further increasing the capacity utilisation.

On the outlook for this fiscal, Mr. Srinivasan said the company expected a cement demand to increase by seven per cent.